NZ again hands over 5G spectrum without auction

The government of New Zealand has announced its decision to hand over mid-band spectrum to the country’s mobile operators without auction in a bid to speed the rollout of 5G services.

From a telecoms industry perspective, it’s a sensible move. We have often lamented the high costs paid for frequencies by mobile operators who then have in front of them the equally financially onerous task of actually rolling out the networks. If you’re in charge of the state coffers then it’s less of an obvious choice, given that forcing telcos to duke it out for the spectrum they need often results in fairly sizeable windfalls for the government of the day.

It’s a tried and tested method of spectrum allocation in New Zealand though. The country’s three mobile network operators – and small cells specialist Dense Air – are currently using 3.5 GHz frequencies awarded to them by the state on a temporary basis two and a half years ago to roll out 5G services.

The decision to make those temporary awards by direct allocation was made as a result of the Covid-19 pandemic and the impact the restrictions would have had on the planned auction process. But clearly the government believes it was the right decision, because now the time has come to award longer-term permits in that same band it is once again eschewing the potentially lucrative auction option.

As such, it has inked a deal with the telcos that will see it grant them spectrum rights in exchange for investment and rollout commitments, although we are not privy to all the details at present. Indeed, it appears that there are still elements of the deal to be ironed out, with the government noting that the allocation will take place “subject to contract negotiations.” But there will be investment commitments in two key areas.

“As part of the new agreement, our three major mobile network operators – Spark, 2degrees and Vodafone – will be required to increase the pace of the 5G roll-out to small towns across New Zealand. There is also an expectation they will continue efforts to improve rural connectivity,” New Zealand’s Minister for the Digital Economy and Communications, David Clark said.

Those two elements will ensure that the market value of the spectrum is realised, the government insists.

“Shared network infrastructure provider, Dense Air, will also have access to the 3.5 GHz spectrum band as part of this deal – helping network operators serve the hardest to reach parts of the country,” Clark added.

It will be interesting to see the conditions to which the telcos are subjected, once the details have been worked out. According to the comms ministry, this will take place “over the coming months.”

It hinted that the long-term spectrum rights will carry a duration of 20 years, noting that this is the norm for spectrum. As it stands, the telcos are using temporary 3.5 GHz licences that are due to expire at the end of October. However, the government will buy itself some time to work out the intricacies of the long-term licences by extending these permits to 30 June 2023.

As well as the MNOs, the Māori will also receive spectrum in the 3.5 GHz band, following an agreement signed between the state and the Māori Spectrum Working Group earlier this year.

All in all, this seems like a pretty balanced decision on the part of the New Zealand government…which is something we have come to expect. But it’s probably worth highlighting that New Zealand frequency auctions do not typically carry massive price tags. It’s not surprising that governments with bigger populations and the potential for multi-billion-dollar auction outcomes make different decisions regarding their spectrum assets.


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